When I spoke at the IRTA convention in 2007, I pointed out that many people associated with the business of commercial “barter” had told me that the industry was at what might be called a “plateau of complacency.” That seems to remain the case today with trade exchange operators content to operate profitably on a small local scale instead of venturing to tap the enormous potential demand that exists for the cashless exchange of goods and services.
This is not merely an opportunity to increase profitability, but an opportunity to provide a much-needed service that is becoming more urgent every day. As conventional money and banking continue to malfunction, small and medium sized enterprises (SMEs) find it increasingly difficult to provide the goods and services that their customers value and need. The inadequate liquidity provided to this sector of the economy by the government and banking establishment, and the misallocation of money to bank bailouts and wars, has caused the current economic depression.
Just like the WIR Economic Circle Cooperative during the Great Depression of the 1930s, the modern trade and barter exchanges are well positioned to ameliorate liquidity problems by providing, as they do, direct allocation of members’ credit to one another. But if they are to improve the value of their services, and if they are to have any significant impact on the economy as a whole, the trade exchange membership base must be greatly expanded. How to achieve that without taking inordinate risks or cutting into exchange revenues has been the knotty question that has blocked progress in that direction.
But now, entrepreneur and experienced trade exchange member, Sergio Lub, has come up with a great idea that provides a suitable answer for expanding the scale and scope of cashless trading, but trade exchange operators must be willing to embrace it. Just days ago, Sergio posted this idea on his blog under the title, Empowering Barter Members to Recruit Their Suppliers. You can click the link to read it there, but I’m including the full article below. Please read it, spread it far and wide, and invite discussion. Mutual credit clearing, the primary service that trade exchanges provide, is the highest level in the evolution of reciprocal exchange, one that makes conventional money obsolete. The world needs it now, and the modern trade and barter movement is best able to provide it.—t.h.g.
Sergio Lub, Saturday, December 17, 2011
Barter is older than money and is now experiencing a Renascence thanks to two factors: One is the increasing scarcity of money due to the global recession, the other is new software that increasingly allows people to earn and spend their barter credits as easily as they use PayPal. Our shopping carts at SergioLub.com and WearCopper.com, for example, accept barter as well as credit and debit cards for the payment of online orders.
Barter will grow even larger if it were to overcome the persistent problem members have when most of their suppliers do not belong to the same barter group as they do. Understandably, suppliers do not want to incur the time and expense of joining another system, while barter administrators need filled applications to check references, and the application fees to pay commissions to their recruiters.
This old Catch 22 problem will disappear once barter administrators allow their trusted members to make barter payment to their suppliers, even when they do not yet belong to the system.
We users will enter the needed data as we process the online transaction, so there is no typing work for the barter office. The new account does not need extensive credit checking since it is known and recommended by a trusted member. It also does not need an initial credit line since it starts by earning barter credits and therefore with a positive balance.
A common objection from new potential barter members is: “What if I cannot find where to use my Barter Credits?” I suggest to address this problem by allowing the inviting member to reassure the supplier somehow, for example by offering a “One Year Money Back Guarantee.”
So, instead of paying my printer cash at 30 days (and then asking for more time a month later because others are not paying me), my printer will be able to spend the trade credits right away. If my printer cannot find anywhere to spend them, then I will buy those credits with cash after a year. Even in the rare case that this happens I still would still enjoy extra free financing and my supplier gets a chance to play barter with no costs or risk.
An extra benefit of having members sponsor their suppliers is that our new members will deliver goods and services that we normally consume, thus reducing the present disproportion of luxury items and this should also help with the problem of having members “on reserve” because they cannot find where to spend their earned credits.
One last objection may come from the barter’s Road Reps that recruit new members for a fee, since for them, for barter administrators to allow members giving memberships for free, could be considered unfair competition.
The barter administrator should explain that the free memberships are gift certificates that members have traded for or have earned, for example one per year of membership. Furthermore, the barter administrator can gradually switch compensation for road reps to a percentage of the transaction fees, so their earnings become proportional to the volume of transactions their customer’s make. Doing this will give road reps the incentive to visit existing clients and help them become more knowledgeable and efficient in the barter economy.
As more businesses accept Barter Credits it does not take long to see a future in which we could choose to issue Barter Credits to all our vendors, to be used on a trial basis, during the time it takes for their bills to become due.
In the era of networking, tapping into our established relationships is the viral and sustainable way to go. Imagine what will happen when my suppliers will in turn earn the right to invite their suppliers, eventually closing my trading loops and making the use of money increasingly optional.
Writing this in December, with the spirit of the Holidays all around, it is quite easy to visualize barter group administrators acknowledging their senior members with free memberships to gift to their suppliers, and with a little effort I can see a few innovators empowering their barter members to recruit their suppliers year-round, thus helping unleash the huge potential of barter.
# # #